Net working capital is defined as: a. current liabilities minus shareholders' equity. b. total liabilities minus shareholders' equity. c. fixed assets minus long-term liabilities. d. current assets minus current liabilities. e. total assets minus total liabilities.

Question

Drake Reeves

Business

9 July, 18:48

Net working capital is defined as: a. current liabilities minus shareholders' equity. b. total liabilities minus shareholders' equity. c. fixed assets minus long-term liabilities. d. current assets minus current liabilities. e. total assets minus total liabilities.

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Answers (1)

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Irvin Preston · Answer 1

The answer is D. assets minus current liabilities

Explanation:

Net working capital is the difference between current asset and current liability. Examples of current asset are inventory, cash, accounts receivable etc. while current liability is accounts payable. It is a measure of company's liquidity.

Working capital management ensures that a company has adequate access to meet its necessary day-to-day operating expenses while making sure that the company's asset are invested in the most productive way.

All other options are not the definition for net working capital.